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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

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03:00:00

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San Francisco, CA, USA

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

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528

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480

TOPIC FREQUENCY

Us 45, China 37, Europe 20, U.s. 18, Washington 11, Mason 10, Groupon 9, Carl 8, Chicago 8, Goldman Sachs 7, Geico 7, Zynga 7, Rick Santelli 7, Pennsylvania 7, David Kostin 6, Goldman 6, S&p 6, Ho 6, Costco 6, Apple 6,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    November 30, 2012
    9:00 - 12:00pm EST  

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from there. >> marginal rantes don't matter. >> they could get more from truly wealthy people when they figure that out -- >> that's what simpson-bowles proposal is. steve, thank you for being here today. >> it's moon cussers tonight. >> thank you. appreciate it. >> nice to be here. >> join us tomorrow -- not tomorrow. join us monday. "squawk on the street" is next. good friday morning. welcome to "squawk on the street." i'm melissa lee with carl quintanilla and jim cramer. david faber has the day off. we have november ism due out later this hour to watch for. as for picture in europe, we did
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have eurozone unemployment ticking higher slightly. a mixed bag there. little change overall in europe. our road map this morning starts with what else? the fiscal cliff. the president heads to a pennsylvania toy factory pressing his case for a proposal that actually leaked last night seeking 1.6 trillion in tax hikes. republicans in morning balking and cliff fears prompt another company to issue a dividend and it's whole foods. >> owner of taco bell, kfc, have warned that sales hit the skids. the shares yesterday hit a fresh high. facebook unlikes zynga. zynga shares are plummeting this morning on the news. never an ego boost for the ceo when the stock falls on the news that he's keeping his job. that's exactly what's happening with groupon as the board keeps
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andrew mason. the president heading to a pennsylvania factory this morning. republicans have given a thumbs down to the president's plan which includes a $1.6 trillion tax increase, 50 billion in infrastructure spending for next year and limited entitlements cuts. more companies issue special dividends. whole foods will pay $2 a share. kbw yesterday. what's more interesting to you, jim? the cliff discussion and madness or the notion that these companies said we were not managing our balance sheet in the most efficient way. >> i'm a huge fan of whole foods. been recommending them on "mad money" for many, many years. they have the best management. they also have a lot of cash. >> too much? >> they have double the number of stores in america. i would think they need every penny. they do have a tremendous cash flow. costco, tremendous cash flow.
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this is an interesting offset. i know "wall street journal" -- you take the editorial and listening to rick santelli. i come back to the bizarre action of the stock market yesterday. i think to me it seemed like they got further apart. the president comes in with a hard line. that was not a soft line proposal. and yet the market went up. what the heck? >> why? why is that happening? why are futures up today? >> i default to some of what i regard as mechanics of the market. end of the month. maybe people are doing buying. we've all seen these lists of companies that do special dividends. do you want to miss a special dividend with one of these terrific companies? everyone is playing the parlor game but it's paying off. >> the question is what happens to the stocks once the dividend is paid off? once that shareholder record date has been reached, what happens to the stock?
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that's where it gets dicey when that date is prior to the deadline for a fiscal cliff and a deal may not be reached by that deadline. >> very true. i look at whole foods. will that be damage? here's a stock creeping up. some people didn't like the last quarter. i thought the last quarter was fine. a great long-term trend. i think that there's a special dividend and, hello -- >> you're going to buy that because of special dividend? i don't know. >> i don't want to change my find about a stock that i don't like because they're paying a dividend. >> for a stock like apple which has been on the list floating at parlor games with a lot of cash on hand, if they paid a special dividend, that may entice shareholders to come back into the stock, a stock that's had trouble breaking out of a trading range it's been in for the last couple weeks. >> totally agree with you. they did have a board meeting last week. i thought something would have come out then. that would have been a good opportunity. as to what carl is saying, everyone wakes up saying we've been running the company wrong.
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they want to take advantage of what they obviously see as a very high rate for capital gains but extremely high rate of dividends if everything goes wrong. >> there's been chatter that dividends might actually help income, personal income, for this month but the numbers we got today first drop since april or may not good on a month where everybody is buying consumer discretionary names. >> it's extraordinary. there is tremendous wealth in this country. yesterday bob pisani has been tallying the amount of money that's been given in dividends. it's not a great deal in the overall scheme of things. sandy continues to make me feel these numbers are too difficult. i find them unfathomable. the speech is about way too much unemployment and very unfathomable in terms of the actual destruction. you got numbers from two different governors.
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they are unusually low. i don't trust any number during this period. >> especially the number we'll get a week from today which estimates for nonfarm are not that good. 75 maybe. sandy will continue to ring in our ears for the next few weeks. >> and then i believe you're going to get when you get supplies rebuilt and enough bricks and enough lumber. did you see that lumber hit a six-year high yesterday. >> wow. >> copper. a lot of people talking about short buy on copper. everyone saying it's about china. a lot of copper comes from scrap and the scrap in the northeast where there's a huge amount of copper, it's extraordinary. a lot of equipment is stalled. >> think of the copper wires here downtown eroded because of exposure to salt water that need to be replaced. >> when i hear the things that have been thrown away, the 500,000 cases of liquor that
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have been thrown away. all of the mercedes at the dock that have been crunched. salt water. holy cow. >> a story about art studios trying to unload art that's been damaged. >> saline solution could lead to higher sales for ford motor. >> we have four young brands talking about pizza hut down in premarket trade. they expect sales in china to decline in fourth quarter and backing full year guidance below consensus. all downgrading shares of yum this morning. yum has been seating a streak of new highs in the last couple sessions. weakened view for the year and on china but massive run the stock has seen since the end of august or so. >> it took my breath away. i saw the number. top line number looked good. i said, good, let's see how much china is up. china was down.
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they did have tremendously difficult comparisons. u.s. was also weaker. this was just not a good quarter. >> that's true. >> so ubs goes to neutral and trims estimates and cuts price target from 84 to 73. they say that deceleration is going into q-2. >> yum we're not that crazy about. chipotle. panera is a standout. this has been a terrific group. it lost its luster. entire quick serve contingent has become a place that people are worried about with the exception of highest value. panera. it's a decent stock. >> what's also surprising about what young came out with last month is they were talking about china. they weren't overly cautious about china. at the same time we've been getting better and better data points when it comes to china. economic data has been in fact turning. we haven't seen the stock market in china join and now we're not seeing it in yum.
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yum had once been the big multinational china play. if yum can't make it work, what other companies will we start to look at? will we look at nike or another multinational with a decent amount of growth from sales in china. maybe it can't work now. >> nike did have overinventory in china. next week starbucks comes to town. i think they will surprise. this may be an execution issue. i think howard schultz has a compelling chinese story to tell and it's a great growth story. how long are the lines at starbucks? are they longer than the lines in new york city for starbucks? i think the answer is he's got a good story. >> provocative point of view. apple getting approval for iphone 5 in china. a piece in the journal today suggests they waited too long because android now has a really big share of phones that sell for 400 bucks or more. >> they needed clearance from chinese regulators. you can't just go into china and
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unload a bunch of iphones. you need clearance for it. the share did go down by 10% because people had to wait. >> the chinese government had been definitely a stumbling block there and people are very excited about it. they really like android over there. i defaulted to david from "the new york times" as saying there are 275,000 apps for apple. one of the develop storingie ii looking at is chinese products to california to the rest of the country and there's a lot of ports being shot. >> national retail federation said that a lot of product for the holiday season is already in the stores. so maybe it won't be a huge impact and maybe that product can be routed to other ports to mexico and then trucked up. maybe it's a good thing for truckers and fedex and u.p.s.s of the world if the product isn't in the store already, retailers need to get it
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quickly, good for overnight shippers. >> they have all of the stuff in. that's a good point. ksu rang the bell the other day. they're instrumental in bringing goods from mexico. very interesting. >> look at those freight volume which is they report next. meantime, got to talk zynga taking a hit in the premarket. social gaming company changing its relationship with facebook. the new agreement essentially removes the special status that zynga enjoyed among game developers and also now allows facebook to develop its own games. it's been called an open marriage by "the new york post" today and we had a discussion about whether or not this is net good or bad for zynga. you are losing an anchor tenant so to speak. there is potential for deals somewhere else. >> zynga takes your breath away. they are waiting for a bit of good news to happen. when i read this, i said, wow, i knew they were all on the outs.
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open marriage implies you're still staying with the person to some degree. i think that this is a custody battle if anything. >> maybe a divorce. >> yes. no alimony here. >> it's not quite the same space but there's also a lot of discussion we mentioned it earlier on which we'll talk about in a bit. living social and groupon got too big too fast and it's the yelps that got the model better positioned before they went to expand, which is sort of the opposite of what we heard for years. for years it was you have to get big fast. >> that's venture capital way. here's the total adjustable market is 473 billion and we're going to take 100% of that market. give me a break. this idea of getting big fast versus being in bed with the portals as zynga opposite now,
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being in bed with portals and becoming what you need on mobile is the model. yelp, great mobile functionality. >> zynga says they're no the business of making games and have no intention of doing so. they're not interested. with zynga down this much, 9% of the premarket trade, is facebook open to acquiring a game maker whether it be zynga or elsewhere? does it make another deal with another game maker? >> maybe you think this closes the door on social gaming at large? >> it's too much fun. it's too much fun. electronic arts reported a quarter that people weren't crazy about. stocks have moved up. they have terrific games. they move aggressively in the digital. they've been hurt by the analog. watch electronic arts. >> best nasdaq gainers for november, gmc, jcp and
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electronic arts. >> the company has made this aggressive move but at the same time that was the company that came on my show and said zynga is ridiculously overvalued. sometimes it helps when a stock is much higher and another ceo says i don't really care. my company is worth a fraction of zynga. that's nuts. we were talking about omg pop. remember? the ceo was saying this is ridiculous. that's worth -- the valuation there was crazy. it was helpful to people at home because so many people play scrabble that you figure it had to be like monopoly. there was no monopoly there. >> great point. when we come back this morning, we'll get ready for "squawk on the street" exclusive. goldman sachs making a bullish call on the markets. we'll talk to chief u.s.
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equities strategist david kostin. it's coming up at 11:00 a.m. first, as we said, groupon says it's keeping andrew mason as ceo. wall street not so impressed. what's the future hold for the daily deals website? we'll talk about that and one look at futures as we close out a week. it could determine whether the week is positive or negative. more "squawk on the street" live from post 9 in a moment. [ male announcer ] if you're eligible for medicare... now's a good time to think about your options. are you looking for a plan that really meets your needs? and your budget? as you probably know, medicare only covers about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement plans, they pick up some of what medicare doesn't pay. and could save you in out-of-pocket medical costs every year.
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groupon shares falling. the company announced andrew mason will remain ceo which has seen stock fall almost 80% this year. a groupon spokesperson e-mailed a statement saying the board and management people are focused on performance of the company and they are all working together with heads down to achieve groupon's objective. interesting because we saw a huge surge in stock on news perhaps the board considered getting rid of the guy. the guy comes on and says if the board were considering firing me, that would be crazy because stock is down so much. here he is back in the job firmly and the stock is back down. >> this is classic sign, right? great value creation would be him stepping down. that's where i think you would make that pop. but he's got his head down. maybe he's not looking at the stock price. i think he's a problematic figure in the sense that from
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the beginning the press on it was that this is kind of like -- initially youthful company. and, no, we need eric schmidt to come in and straighten it out. >> it's a yahoo! like scenario here. >> for a grown up. andrew, you're the chief yahoo!. remember that. you're the chief groupon. we would feel good. maybe what he needs to do is get the chief executive officer from someone who regard as gray beard. they do have interesting people on the board. >> howard schultz. i'm trying to remember if he's still on the board there. they did have a realignment. >> i think starbucks went down in part because of young. there's probably someone that wants to step in the fray there at groupon. >> someone out there wants a ceo job. >> you know what's interesting? do you ever hear -- probably
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number 72 at amazon, get that guy to go over to groupon. maybe number 147 from amazon is a good guy to run groupon. >> i always think back to that $6 billion offer from google and what a save. >> height of confidence or height of arrogance. >> someone should have brought yelp. i use yelp a great deal. i'm not crazy about it right now. i got this. it's very frustrating. people don't go into yelp. they love to go into trip adviser. that's the one they love to put comments on. >> how many request for room number seven since you tweeted that picture? >> you ain't never going get that. >> it's all booked up? what's the first availability? that's a lifetime room. my buddy who runs it was just saying, listen, you can't get
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number 7. number 7 -- what's behind number 7? a four-poster bed and nice fireplace. it's become the late-night place to be. >> apparently. >> all right. as cramer mentioned it's the last trading day of november. how do you go out on a bullish note? cramer has you covered. later on. splunk is up. we'll talk with the ceo of the big data software company straight ahead. look at this month's best performing sector. consumer discretionary up almost 3%. much more "squawk on the street" straight ahead. nobody said an inkjet had to be slow. or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series from brother. easy to use.
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a few minutes before the bell on a friday. jim's mad dash here. we'll kick it off with what you are calling the ultimate growth stock of the year? >> yes. this company -- david faber, not here today, i always say ulta is the key. they keep the market powered higher. great same store. a lot of people have been worried. cfo resigned not that long ago. a lot of shorts have been saying must be something wrong. i don't know. looks like no. >> interesting. >> the guy just was a personality fit. you tend to believe it when you see this. >> amazing chart. you are looking at oil services companies. >> halliburton, the pressure on pressure pumping pricing has been horrendous. today at goldman they say it's getting better. i find it surprising. you know what?
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stock has been a real dog. >> wells also makes a call on marathons, right? >> we got some marathon oil, murphy, conoco. oil stocks are very cheap. people just think that they do nothing anymore. i think they are safety. they are safe stocks. >> last trading day of the month. after the break we'll talk about what some of the big winners and losers have been. >> when we come back, the new year is coming soon. how do you make it a profitable one? stay tuned for an exclusive with goldman's david kostin. you'll want to hear his five best investment ideas for 2013. also ahead, house ways and means committee member of pennsylvania as the president goes to pennsylvania to make his case on the fiscal cliff plan. what's the republican congressman have to say about it? opening bell is just 4 1/2 minutes away.
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"squawk on the street." we're just a minute and a half away before the opening bell rings. we're right now looking at a slightly higher open according to the futures. could be a big session for luxury names. tiffany getting a downgrade getting whacked once again after the dismal numbers coming out yesterday morning. >> merrill lynch takes it down. i see people abandoning the name. people are trying to figure out what's an outlier and who is doing well. there are too many misses here. >> i don't know -- some may say it's a problem with luxury consumer spending but in today's session we have companies hitting two decade highs in europe. high end is doing okay in europe. >> german retail sales today were not good. >> how do we deal with the fact that europe stock 600 closed at
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a 52-week high. >> or that confidence is at a four-year high in italy. >> even though germany clearly headed into a downturn. what a remarkable market. the money is going to europe. >> here we go. realtime exchange. at the big board, western asset. over at the nasdaq latin markets. >> as we said, it's the last day of november for the markets. if you are just looking at the s&p, jim, and you wanted to take the biggest winners, amf is up 50%. computer sciences, jdsu. the top three. you can make stories out of statistics. worst for s&p is jcp and cable
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vision. >> amf, shorted name that did blow out numbers. computer sciences, endless chatter about takeover. i didn't see anything in fiber. there was a time when jdsu stood for just don't sell us. a great run-up. and then it was just don't sue us after the crash. >> speaking of guidance today -- >> surprised that this isn't down more. these guys are serial missers. they peaked a couple years ago. it's been a house of pain. house of pain does not -- it's an apartment block of pain now. >> it's a 35,000 square foot mansion of pain. >> yes. stay away. it's not a short sale like in mortgages but i don't -- teva is
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a disappointing name. teva has very important drug. it does come off patent soon. nobody wants to touch this baby. >> we're watching apple. shares are down just by half a percent or so. 0.6. we'll talk with jim later in the show and had a note saying it's a point where you can walk into an apple store wanting to buy an iphone 5 and you can walk out with the iphone 5 but suggests that the supply issues are over. they are ironed out for most of the major carriers. there is some chatter that deutsche telecom with t-mobile could offer iphone soon. >> the sprint bump was very big. when sprint took on, it was a bold move. short-term pain, longer term gain.
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look, i don't think -- it's been a rocket ship. it could cool a bit but i am hearing about a strong apple christmas holiday season. very strong. not -- we didn't like it when it was supply constrain and now that they have supply, it's good, not bad. >> conagra, jeffries goes from a buy to a hold calling the ralcorp deal a game changer. price target goes 29 to 35. >> i think there's a bad mood at conagra. he's a rutgers guy. that was something. a must watch game. it's not too late for conagra. it was up $1.47 on the day it made the acquisition of ralcorp. this is not an early call. >> young brands trading lower. if you look at nike, we mentioned nike is one of the multinational china plays that is seeing weakness down by 1.4%.
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just an area to watch. there are going to be extrapolations people want to make like they did with tiffany yesterday and higher end consumer, people will want to make extrapolations from yum to other multinational china plays. >> i want to be careful against china here. a friend of mine came back from being in china. they are very much committed to making the first quarter to be very strong. i know in our country we're very much committed to going off the fiscal cliff and having big tax increases. they feel that they have slowed their economy too much and it's time to put more gasoline on it. they actually have the ability to do that. the communist party is very well run. ceo is terrific. they may declare a special dividend. >> the ceo is no andrew mason. >> no. if the ceo were to leave, i don't know if the stock would pop. >> bob pisani is on the floor
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watching what's moving on this friday. good morning, bob. >> we opened flat by in large. i have to say the commentary this morning, the mood is gloomier than i have seen recently. there's been a lot of hope that a deal could be reached here. how's this for gloom? 2013 is going to be tough. fiscal cliff or not. how's this one? we lose either way. you get a fiscal cliff deal, you'll have tax increases and spending cuts. they'll cut 1%, 1.5% off gdp. that's not good for stock market in 2013. you don't get a deal, you get mandatory spending cuts that will be worse. meantime, there are shorter term worries. how about getting through today? how do you go long or short here today when over the weekend anybody -- i mean almost anybody, can appear on a sunday talk show and make some inflammatory comment about the fiscal cliff not working, it's a mess, it's never going to happen and then you wake up and you're
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down 15 points monday morning. that's a problem figuring out what to do over the weekend. it could go the other way. generally it's a little bit more on the gloomy side. then you have the problem with december. we're going into the last month. today is the last day of november. people are behind the curve. a shocking number of people i spoke to are below whatever their benchmark is. do you lighten up? do you stay long what you got? it's hard to maneuver around because you need to get outperformance. you need to get alpha in the month of december and a lot of guys that's in short supply right now. there's tough decisions that have to be made in the next couple of days. meantime, we saw futures weaken as we got some of the personal spending and personal income data and personal spending weaker than expected. even accounting for sandy, consumers looking iffy. that's impacting thinking as well. did you see what happened in japan overnight?
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everybody in japan has become a stimulus guru. one of the big best for 2013 is massive stimulus in japan and yen will be weakening. we know this trade. people have bet against the yen for years. it's one of the great bets of all time. people are piling on saying 2013 will be the year the yen weakens. japanese cabinet overnight approved a new stimulus package. they approved one in october. now they have another one on top of the old one. more spending that's involved. there's a lot of politics. an election coming up in december. the current party is way behind. the opposition party looks like they will win. the guy who leads there is in favor of more stimulus. my point is everybody -- this is the cabinet of japan doing this. this is not the central bank of japan. they are tapping central reserve who have their own little program that's going. my point is, guys, i have been laughing at people for years, jim, who have been betting
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against the yen because they've been losing but 2013 with everybody in the pool, everyone in the stimulus pool, everyone in japan is anti-austerity. japan is anti-austerity. >> i had the privilege of listening to a contributor yesterday and one of the major themes you'll see in 2013 is the cold war between japan and china. it's not going to be anything involving aircraft carriers. chinese landed a plane this week on an aircraft carrier. he said be careful of japan. china has basically put their foot down and he actually said japan has been a little bit on the provocative side. >> all of this rattling over a little group of islands. it's amazing how slightly materialistic japan is sounding over these islands. >> they're going back. they haven't forgotten nor
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should they given the fact of the horrible atrocities. thank you, bob. let's shift to bonds and dollar with rick santelli at the cme group in chicago. >> before i get to my charts just to weigh in dollar is screaming against the yen again and keep in mind if you have an export economy and you're japanese watching the dollar race up like this, you're pretty happy about it. maybe it helps the export side. now back to the markets. we had personal income and spending this morning. you know what? you want to see income going through the roof. that's not what we have. it was still better off than spending down a couple tenths. there's a lot of households out there that want to tighten up and get fiscally responsible. seems at odds the way the programs work to address slowness in the economy. there it is. you can see we're clearly moving down. 160 continues to be an important level. not a lot of volatility in the treasuries because they're just staying at these relatively low yields all things considered. now, if you look at the next
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chart, this is very fascinating. etf that represents the noninvestment grade, the junk if you will, hyg, it's been on a terror almost as wild as what's goon in the new issue market with getting money to pay out dividends. tune in at 10:45. we'll talk about some of those special dividends and our last chart is the euro versus dollar. you can see that it keeps doing its pacman bites. most think if it closes above 130 for the weekend, watch out for some strength on monday so say traders. jim, back to you. >> a good idea. that could explain, rick, this market is up again. the dow is up. it is so out of sync with the news. it really is. maybe in europe up, china up, wow, our market is up. totally out of tune. let's check out the latest news in energy and metals with sharon
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epperson at the nimax. >> traders on the nimax floor say they don't want to stick their necks out right now not ahead of the weekend not knowing what will happen with the u.s. budget resolution. there's too much uncertainty here and that's a big reason why you are looking at basically flat prices across the board in the energy complex. we're looking at oil prices basically in a holding pattern here under the 88.50 level for wti crude and around 110 for brent crude price. when you look at what's happening in oil prices over the course of the week, we're where we are a week ago and cliff on and cliff off talks keep traders with little incentive to trade the flat price. in terms of gold market, we're looking at the february contract here as the most active contract for gold and there we have seen a lot of price action in the gold market this week. we've seen record volume here at the cme in terms of the gold trade. prices right in the middle of the range they've been trading in around the 1725 mark. back to you guys. >> get ready for some breaking economic news that could move
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the market. chicago pmi data just moments away. also ahead, splunk is one of the best performing ipos. the stock is pulling back this morning. we'll talk to the company's ceo as we head to break look at this morning's early movers. ♪ ♪ [ male announcer ] they are a glowing example of what it means to be the best. and at this special time of year, they shine even brighter. come to the winter event and get the mercedes-benz you've always wished for, now for an exceptional price. [ santa ] ho, ho, ho, ho! [ male announcer ] lease a 2013 glk350 for $399 a month at your local mercedes-benz dealer. at your local well that was uncalled for.
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welcome back to "squawk on the street." in three seconds we're going to have the latest chicago purchasing managers survey. now i get to see the data. is it the third month down under 50? what is it? 50.4. wow. 50.4. up 0.5. back-to-back months under 50 for the first time since '09. run us through the surprise in this surprise strength in the chicago report. >> if you look at this report, it looks pretty strong. you have production up big. employment tracking production. you have supplier deliveries lengthening out a decent amount and prices paid up almost 11 to their highest level since august
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2000. >> we know there's no inflation. don't you listen to ben bernanke? >> right. actually think what you have to do here is look at this number. not a strong number by any means. you have to look at new order components. it's the most heavily weighted component in this report. >> let me stop you there. 45.3 down 5.3. lowest since june of '09. all hot from the press. go into that. >> the other thing here, rick, is that order backlogs are in contraction. they were up decent but still in contraction. when you have new orders diving deeper into contraction and order backlogs not able to get behind it, it will not instill confidence in a recovery. >> if you being an expert synthesize the number, ten being the best, where would you put this report?
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>> a three or four. this is a weak report. you have to look at trend data on this report. back in may i talked about this report and some of the metrics showing that we would be in recession again. we have business barometer at 50.4 totally neutral point. it's one of the lowest levels that we've seen in three years. it's a big red flag. >> thank you. back to you. >> thank you very much, rick santelli. we did see markets turn lower. we're now in the red across the board. the oracle of omaha has his eye on spain. warren buffett going to pay a spanish lender. the bank has been viewed as one of spain's stronger banks. the deal marks a rare move into the eurozone for buffett. shares of berkshire hathaway are
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up higher. >> you said it earlier in the show, jim. europe is where the money is going. >> i think it really is. i have s.a.p. on tonight. we're all familiar with the company. keeps going higher. when i had sales force.com on "mad money," mark said france starting to do really well. germany starting to do well. seems to be an upturn. >> record unemployment and all of the other metrics tough to figure. >> market up five. when we come back, facebook and zynga changing the terms of their relationship that would allow the social network to make its own games. brings to us this morning's squawk on the tweet. come up with a unique relationship status for facebook and zynga. first thought is it's complicated. tweet us and we'll get your responses throughout the morning. people are going to have to sort out net-net and whether or not this is good or bad for the company. for either company. >> right. it's funny.
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you are trying to push metaphor of open marriage making the case that -- >> my point is, i mean, this is one where -- look. zynga has facebook. that was the whole point. >> that's why zynga was so hot. >> why they went public in the first place. >> yes. that was a match made in heaven. >> if they tauted themselves because they got revenue from facebook and that's in jeopardy, that percentage could go away for the short-term and that's why stock is trading lower. >> gaming is fickle. people go and out. this game is hot. that game is hot. i'm sure there are people that play draw something. >> very few. fewer. >> it was hot. it got knocked. >> yeah. >> when we come back, what will $95 million get you in the big apple? we'll have that for you.
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up next -- >> coming up, yep, it's friday. before with you head out of the office and dance in the street, we've got a whole day of trading to get through. cramer will help you get in the mood with six stocks in 60 seconds when "squawk on the street" returns. i took dayquil, but i still have a runny nose. [ male announcer ] dayquil doesn't treat that. huh? [ male announcer ] alka-seltzer plus rushes relief to all your worst cold symptoms, plus it relieves your runny nose. [ sighs ] thank you! [ male announcer ] you're welcome. that's the cold truth!
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simon is going to get us ready for a friday edition of 10:00 a.m. >> we have to talk about zynga. is there any hope for the stock now? we have analysis on that. representative jim gerlach will join us and ceo of splunk will be on the show. >> six stocks in 60 seconds. special dividend doesn't buy you love everywhere. >> goldman sachs goes negative. they had a sell one other time.
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this is a very well run company. i wouldn't bet against it. >> are we doing onning conagra ? >> the commerce department -- this is the dotcom. they run the registry. it looks like it does limit the price increases. people are fleeing it. a great growth business. it's really an eye business. people think botox. there are multiple uses for botox. great run here. >> citi making a call on merck. >> no one ever got hurt on merck. >> bernstein on netflix? >> netflix says american mobile is going to go in. a lot of capital. don't want them as an opponent. >> cracker barrel? >> one of these things that's
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happened is these restaurant stocks, carl. they've been really getting people down. cracker barrel below the street guidance for the future. this has been a terrific stock. >> let's talk about what the weekend will bring. it is difficult to go long leveraged into a weekend in which winds could shift. geithner will be on every single morning show. >> fortunately i think we have a chance to go and speak to geithner on "meet the press" or get chatter. i just keep coming back. what the heck? how come this market is not down big? i think that there's tremendous resilience here. people do believe that we're about to have a deal. you have to watch sunday's show. it will determine monday's opening. >> what do you make of the opening offer? it's been said this morning that it's his attempt to smoke the republicans out and start tabling some proposals of their own? >> this was a hard line. listen, this is where we are.
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i got elected, not you. i'm the guy in charge. i think that republicans are taken aback by how hard a line the president is taking. this is one of those where let's not lose sight of the fact the market has had a good run. it won't be good if they don't reach an agreement. >> if the idea is that it will take a lower stock market to get politicians to get serious, right, why would you buy anything here? >> remember in t.a.r.p. the market dropped 9% between the first vote that was no because t.a.r.p. was hated as the budget agreement and then it rallied. here's what i think. this time the economies around the world are getting better. the stock market, china getting better. europe does seem to be getting more -- the things that worried us for a long time are less worrisome. because of the debt ceiling you don't know when you will get a bottom. october 1 to october 5, you had to be in. it happened so fast. when they make a deal it happens so fast. it's a blink of an eye 10% in a
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week. you have to be careful. you may not be able to get back in. the old great peter lynch always said there's a couple days of the year that make all of your money. if you're not in them, you don't make money. >> tonight on "mad." ? >> i have s.a.p. i'm going to say to the great bill mcdermott. how are you hitting numbers in germany? come on. what is going on that there is resilience in euro 600. this may be the remarkable story. interest rates are low all over europe and it may be the story for 2013 is that europe is a good place to invest. >> he has that going for him and look at that handsome face. >> i love him. one of the best guests we have on cnbc. >> have a great weekend. >> a lot more in store later this morning including a live interview with goldman's david kostin and talk five benefit ideas for 2013. more "squawk on the street" is back in a minute. with the spark cash card from capital one,
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weekend. let's get the road map for the next hour of "squawk on the street." zynga and facebook reevaluing their facebook. is this the final nail in the coffin for zynga or still a reason for investors to like the stock? we'll show you how to play it. splunk reporting better than expected results for the third quarter. ceo joins us live with reaction to the numbers in a first on cnbc interview. the president making his case for action on the fiscal cliff today in pennsylvania. we'll talk to republican congressman jim gerlach from that state about the trip and what needs to happen to get a deal done. >> one thing is for sure, fiscal cliff comments from washington have been having an impact. >> i would hope our friends on the other side can turn off the campaign. >> we could have prevented this crisis months ago. by just simply adopting what passed in the senate. >> president obama is meeting with high profile chief
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executive officers today to talk about country's fiscal issues. >> we're here to support doing the right thing and putting america back to work. >> we don't legislate but we know the consequences of a failure to reach an agreement. >> only way democracy works is through compromise at the end of the day. >> i'm optimistic we'll continue to work together. >> our ultimate goal is an agreement that gets long-term deficit under control in a way that is fair and balanced. >> stocks trade on fiscal cliff comments from president obama and john boehner. >> no substantive progress has been made in talks between the white house and the house over the last two weeks. the white house has to get serious. >> republicans know where we stand. we have said it. we've said it. we've said it so many times. >> i think all of us today are confident we can reach a bipartisan agreement by christmastime. >> according to a congressional
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republican aides who have talked to "the wall street journal," they obtained a copy of the white house prover here in the negotiations. >> do you have faith in any of them to rise above? >> would it be okay to go over? >> we will rise above. >> eamon javers joins us live from washington. they seem farther apart than ever before. the dow is above 13,000 for the first time in several weeks. do you think the markets are reading comments correctly? >> i do think markets have gotten it wrong a lot this week. they have been reacting strongly to things that are boilerplate information and basic statements from congress that we hear all the time and markets are taking that the wrong way. last night we did see the white house make a breathtaking opening gamut in these negotiations and it's a reset in our minds where we are in this negotiation. we're at square one here.
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take a look at the specifics that were in this white house offer that some dispute over whether it was entirely new or not. here's what they are offering when treasury secretary tim geithner came to the hill yesterday. 1.6 trillion in tax increases up front and continue the payroll tax credit or some similar policy. they want a permanent increase in the debt limit. they want a one-year extension of expanded jobless benefit plans and at least $50 billion in new spending to spur the economy. i talked to one house republican aide yesterday who said this represents a complete "break from reality" on the part of the white house. clearly a very tough opening offer particularly on the 50 billion there are in new spending and permanent extension of the debt limit. congress views that as its prerogative to review the purse strings. they won't like that on capitol hill. the president in pennsylvania is going to make the case here in a campaign style rally that in fact republicans are the ones who need to give in in this
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negotiation and he will say that he's not going to agree to any deal that does not increase tax rates for the richest in this country, guys. >> in the meantime, there was an audible gasp from mitch mcconnell when geithner laid it out. >> mcconnell called conservative writers in town that he burst out laughing when geithner laid this proposal on the table yesterday. it's clearly not the kind of proposal that will be the frame work for a final deal but definitely the white house saying we're negotiating from a position of strength. the polls support us on this. election results support us on this and we have white house and senate and you republicans only have house of representatives. you're going to need to come toward us in these negotiations. this is the biggest poker game in human history. there's a lot of bluffing and gambling going on here. that's what we're watching. >> it's not happening in 3:00 in the morning in vegas. that's a good way of putting it.
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thank you. we'll talk to you later on. zynga taking a hit after announcing yesterday that facebook has amended an agreement that gave zynga strong access to the social network's 1 billion users. the change will take place on march 31st and end zynga's ability to promote its platform on facebook. michael olson joins us this morning. good morning to you. >> good morning. >> were they basically in a position where they had to do this? >> you know, i think if nothing else the biggest thing to take away from this is that facebook is trying to diversify. they were attached at the hip. facebook still has seen success with different developers in the social gaming community and they want to put zynga on an even playing field now. >> stocks down 8%. is it clear to you that it's truly a negative for zynga
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itself? >> i think it's a negative. there's a lot of talk about facebook amending this agreement to suggest that they could develop games and i think that's probably less likely. we are definitely in a situation where the agreement is less favorable to zynga than it was before. even if facebook doesn't end up developing some of their own games, it's like you said a cross promotion issue for zynga now that they'll have less data from facebook. >> i'm trying to understand how we didn't know about this at all. did we know -- we knew there was an agreement in place. was there an expiration to that agreement? you would think that this would be a disclosure in some way. you see stocks reaction to this being reamended. >> it's definitely material. i'm not sure what the timing of the agreement expiring was. the bottom line is zynga had a
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favored nation situation here and they had access to data that other developers didn't have for cross promotion. it shows that zynga's financial performance has suffered and partnerships will suffer along with that. >> so if you have facebook saying we're not going to go out right away and start doing our own games, do you believe them and why would they say that and change the agreement at the same time? bottom line, does zynga have a giant competitor on its hands where they once had a friend? >> well, i think that's a great question. i guess that's what's getting built into the stock is that there is an assumption that if they are amending the agreement to suggest that they will develop their own games, that even if it's not today or tomorrow, eventually they will. i think the reality of it is that's probably the case. it probably won't be today or tomorrow but sometime in the next several years, it wouldn't be shocking to see facebook entering that market and becoming a more direct competitor. >> for all of the negative comment there is surrounding
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zynga, you might wonder why there's value left in the stock at all. why does it trade at $2.40? >> if you look at the cash they have on hand and the headquarters they own in san francisco, if you strip all of that out, there's not much enterprise value assigned to this company at this point. i guess to answer your question, there's not a lot of value assigned to it beyond the cash and building that they own. >> does it get bought? >> the building? >> no, zynga. the business. >> i think it's possible. as the stock continues to kind of wain here, there could be others that enter this space. i think the reality of it is that more likely scenario is we'll see other competitors enter the space and more developers and we'll see zynga kind of striving to enter the mobile gaming market to a greater extent. that's their ticket going forward.
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if zynga gains traction on the mobile front, there's a chance here. >> michael, appreciate your insight today. have a good weekend. >> thanks. >> michael olson. andrew mason can't feel good today. groupon shares are tanking after the board said he'll stay on as ceo of the daily deal site. jordan is an internet services analyst and has a mutue aual ra on groupon. are you surprised that mason is still in the job? >> i'm not surprised at all. what we're talking about here is who is the right person to take over a 10,000 person sales force restructure this entire business and such. are they ready to go in that direction? anything short of that and you would have to keep the management team in there. when they are ready to make that decision, when the board steps up and says, okay, this isn't working, then i think you would see a big management transition. i would imagine that happens early next year if they don't
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get more traction. >> so what does the week mean overall? there are people on the board who attempted to humiliate mason in public by saying he wasn't up to the job. >> i can't speak for what people on the board said or did to mason. i think it's pretty clear that particularly outside the u.s., whatever groupon is doing doesn't seem to have resonated with consumers or merchants or both. in the u.s. their business is actually fairly strong. going through a transition from the daily deals business to groupon goods and investors have an issue with the margins of the e-commerce business. if you look at where is the value of groupon? the value is in the u.s. business and perhaps in some of the larger more densely populated markets within europe but they're in over 400 markets. they can't all be good. >> it sounds like you're saying that the clock is ticking on mason and he has a time frame in which he needs to gain traction.
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at the same time it looks like daily deals business may be overall -- i don't want to say in a decline but facing some troubles with living social announcing some major layoffs. what can mason do in the short amount of time to actually prove that he deserves to stay on the job? >> this is really less about andrew mason specifically. i think there is a chief operating officer and other people working at the company. so when you look at daily deals, is it in decline? no. strangely it's not. not in the u.s. it requires a company focused on daily deals to have a huge sales force and then incredibly dense amount of offers within a locale so that the offers you receive in your e-mails don't seem completely irrelevant. that offer density is something that is very hard for a second or third or 50th player in the space to put forth. that's why living social is cutting back trying to focus on
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things that are profitable. if you're the biggest which groupon is by a long shot still, they can make it work. it's not perhaps being run optimally today and i'm sure they'll try to make that change over the course of the next year, but that offer density they have it and they have the sales force and they're not shrinking in the u.s. outside of the u.s. it doesn't seem to be working. >> i'm trying to count the number of companies you have seen start up and go public and you name it. if being first and being biggest isn't enough, does that change the way startups have to think from now on? >> i think this whole group of ipos that came out which happens in every ipo cycle, it sends to make people more reluctant to go public until they have the business model figured out. i think it will delay the period of time that it would take for a company to get public from inception to ipo. that's probably a good thing for investors. probably a good thing for the companies. you want them to make the mistakes that they're going to
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make while they're a private company. had groupon done that with this accounting and not reserving enough for refunds and it was a private company, no one would have cared or even known. that's the key here. when the ipo scrutiny is there and people are losing money and it's on every news show and it's a focus and the pride of chicago bottled up, it's hard to make sophomore mistakes. >> just before we let you go, does the stock trade higher or lower from here briefly if you would? >> my guess is that as they get the material weakness and accounting tag removed sometime next year and as they show that the groupon goods business actually has some legs, i think the stock probably trends higher. i would imagine that a management change happens early next year as well so anybody can kind of take a guess as to exactly when. >> good to join you.
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have a great weekend. speaking of technology, don't forget to tweet us with facebook and zynga changing the terms of their relationship facebook is now clear to make its own games. that brings us to this morning's squawk on the tweet. come up with a unique relationship status for facebook and zynga. we'll share your responses throughout the morning. coming up next, new frontier of tech is here. the ceo of splunk joins us next on a first on cnbc interview. >> and goldman sachs rolling out crystal ball for 2013 and things are looking bullish. we'll dig deeper into that 1575 year end target on the s&p and the five major investment themes with goldman's chief u.s. equity strategist david kostin. [ male announcer ] 'tis the season to discover the kid in all of us. enjoy free shipping and great values on your holiday shopping from l.l. bean.
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>> we are watching shares of data analysis company splunk come down. they raised revenue guidance for the year. joining us now for first on cnbc interview is splunk chairman and ceo godfrey sullivan. >> good to see you. >> tell us what you are seeing in current quarters and company's willingness to sign on deals. >> great quarter.
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record revenues. revenues for the company up 67%. 350 new customers license revenue up in 50% range. it was a very healthy quarter all over the world. >> in terms of what we're seeing now as we get thick and deep into the fiscal cliff negotiations, are you seeing companies even a little bit less willing to sign on? >> we haven't seen that. we had revenue growth in all three geographies, asia, europe and americas all above 60%. we actually saw strength all over the world. hasn't seen too much reaction on the cliff. depends on your definition of cliff. if cliff means reduced government spending, we could jump off that cliff and land in a nice, warm jacuzzi. >> based on what you see now, you're not seeing any slowdown anywhere in the world? >> every geography was strong for us in q-3. >> wow. in terms of what you're seeing for next year, what are you
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anticipating? if we do not reach a deal and it's pushed into next year, do you think there will be an impact? is this something we haven't seen yet play out? >> if taxes go up significantly, that would be have a contract n contractionary force. you need a table that shows federal, state, local, property taxes, all of that together if you live in sunny state of california where it is raining hard today, the combination of federal, state and medical is now up in the high 50s maybe 60%. i think the combination of all of those new taxes has to have a contractionary impact because make home pay will reduce by a sum noticeable amount. >> let me take you back to business and valuation. we're trading at $28.40 on your stock. it wasn't so long ago that you were touting it around at $11 or $13 a share and then priced at
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$17. $17 seems a long time ago. what do you think of the valuation at the moment? >> we had a secondary offering about 90 days after the ipo and we priced the secondary at $28. it feels like we're sort of in that range where knowledgeable investors who understand our business plan we're at about the range of where we priced secondary 90 days ago. it's hard for me to complain about valuation. i think the thing that's most fun is how many of the analysts who cover us actually came to our user conference in september and spent a day or two talking to customers and listening to customer presentations so they are very tuned into how big this opportunity is for splunk and how our first mover status is taking hold. >> it's fairly rich at 13, 14 times revenue, not profits. that's where we are at the moment. it's about whether you are taken out by a bigger cash rich technology company ultimately. are you in conversations with potential acquirers? >> probably the multiple is built more around our growth rate because there's not very
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many technology companies free throw growing at 50% or 60%. that's why the analysts are so bullish on this splunk opportunity. we haven't had conversations. i'm not ready in acquiring any of those companies. just didn't make sense to talk at this time. >> forgive me. it's the english accent. are you talking to anyone that might acquire you? >> i don't want to acquire them and hopefully they don't want to acquire me. i'm not having any conversations. life is too fun. we're having fun with the company and customers that it just wouldn't be fun to sell it. >> godfrey, listening to you talk about the state, local, federal taxes, you can just hear executives having those conversations around the country. if we get some kind of dirty frame work, right, very messy. push of hard decisions in the next year out of washington, what is the immediate tangible impact on your clients, on
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orders, would we see that right away? >> i expect they are starting to look at what happens to employees and say what would happen to take-home pay after the first of the year and what do we have to do in terms of protecting them from that vacuum effect of the increased tax rates on disposable income. it might have an inflationary impact in terms of wages having to go up to offset this decline but i don't really think it's going to have much impact on corporate tax rates that won't change much. already at 37%. highest in the world here. i don't think there is too much impact on corporate decision making. >> are you doing anything for your employees in order to protect them? it sounds like a true worry on your part but also on the part of your staff moving up bonuses for instance or maybe restructuring pay packages thinking about that for next year in anticipation of taxes going higher? >> the way we structure our pay,
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it's all performance based. everyone has a base and then performance base bonus. our bonus that we pay out or tied to growth rates and achievements against business plans. we're doing that analysis now and every company is to figure out what happens to this take-home pay if everyone gets hit with a tax increase. you have to do analytics on it now so you can react if the time comes. >> one last question here. you are very excited and optimistic about the business. you are having fun, et cetera. you still haven't yet posted a profitable quarter. what's the time frame on that? >> in q-4 guidance we forecasted a profit for this coming quarter. with our growth opportunity, it's a lot more opportunity for us to invest our earnings back into the company and so while we run pretty close to break even,
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we are actually cash flow positive every quarter. we flowed $6 million almost 7% of revenues were positive cash flow last quarter in spite of the fact that gap or nongap measures show us at a very slight loss. so the business is healthy. we flow positive cash and invest everything back in for products and customers. our investors are happy with our model and encouraging us to stay on course with it. >> godfrey, good to see you again. hope you come back soon. godfrey sullivan, ceo of splunk. a choppy trading session for stocks with worries over the cliff, uncertainty in europe. we'll tell you how to trade that volatility coming up. >> the network will continue to rise above partisanship and jim gerlach will join us to that end. stay with us. this is cnbc. good morning. [ male announcer ] this december, remember -- ♪ you can stay in and like something... ♪ [ car alarm deactivates ] ♪
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both sides appear to be further apart than ever on the
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fiscal cliff but the market is holding comfortably above 13,000. joining me now is steve grasso. why is the market able to be so resilient at this stage? >> the market understands there are certain things you can still do. you can fix it retroactively. geithner can freeze withholdings. you won't see an automatic kickup even if a lot of tax rates for the middle class even if there is no deal. >> interesting. >> i don't think people realize that that there's a lot of ways around this "fiscal cliff." this political theater, if you don't allow these tax cuts to expire on the rich, the 1%, it's .25% coming off of gdp. you are losing a quarter percentage point. granted gdp numbers were better than we thought they would be. you are still losing a quarter percent if you let these tax cuts expire.
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it's an odd thing when we're so fragile on growth. >> let me take you to the trading element. what's happening is you get continued announcement of special dividends. you have been buying stocks on that basis. talk me through where you are now on perhaps what people may buy moving forward. >> it's a process that you really want to take into effect. it's got to be a company that you think is going to have some growth going forward. i bought winn. based on the company's fundamentals and then also for the kicker, the special dividend. that's something that i played. i also bought costco because i like the company's underlying fundamentals and a kicker for the special dividend there. you must like the company. >> that's important. the stock as it goes ex-dividend as we saw with choice hotels, it can plunge and it's very, very dangerous. >> this is not rocket science. it plunges because it trades without the dividend. it goes ex-dividend that day. you have ex-dividend day.
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there's a bunch of different dates that you need to be koz nisent of. as long as you are on record to owning that stock, you are entitled to the dividend. you don't need to hold it until payable date. it's very interesting. i think people don't realize that. >> thank you very much. steve grasso, have great day and great weekend. we're almost there. melissa, back to you. >> want to know what the inside of a $95 million apartment looks like? it's right here in new york city. we'll take you behind the doors a little bit later on in the show. as we head to break, a look at the top five most expensive manhattan apartment listings. number one, the penthouse at 150 west 56th street. that's $100 million. the 18th floor of 781 fifth avenue is $95 million. 15th floor of central park west, $95 million. and lastly, apartment six at 240 riverside boulevard for a mere
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$75 million. more "squawk on the street" straight ahead.
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president obama's fiscal cliff puts the focus on another company. we want to listen into what the ceo had to say about the cliff. >> i think we have to rise above all of the partisan rhetoric that we've been talking about. what we're talking about here is a fiscal cliff as a math
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problem. we have solved bigger problems as a nation in the past. i'm 100% confident we'll have a deal by the end of the year and gdp growth will be above 4% next year. >> congressman jim gerlach represents the district next door to where the president will be today. yesterday we had speaker boehner come on national television and say the president needs to stop campaigning. here he is yet again today going basically to your part of the country. how does that feel? >> he's going to be up in southeastern pennsylvania near where my legislative district is. i think the president ought to get off the campaign bus and get into the conference room with the speaker and the other congressional leaders and work out a deal. we only have about 30 days to go before the end of the year. he shouldn't be right now up in southeastern pennsylvania. he should be in washington, d.c. working with the other congressional leaders to get something done. >> he obviously did put something on the table yesterday. the reviews of which have not been universally good.
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is this an attempt to smoke the republicans out and get you to start tabling some specific measures of your own? some dollar figures of your own, something the speaker was unwilling to do yesterday? >> well, the proposal came forward yesterday really is a joke. it's not much of a starting point from the other side of the coin here. clearly the president said over and over again he wants a balanced approach in terms of dealing with our current fiscal situation. to be balanced, he needs to come forward with significant spending reduction positions. so far just saying he wants to at some point in the future look at cutting $400 billion when under his own budget from last year would create a $6 trillion deficit over the next ten years, that's really a very poor start to his negotiation position. >> i keep hearing you say the president needs to do this. he needs to do that. what does the gop need to do? >> the gop already has put forward a spending reduction
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plan. >> so your work is done? >> of a house budget resolution we passed a few months ago. >> so you're done -- >> we want to put forward new revenue increases in terms of tax code changes. that's where the president ought to be in a conference room with the speaker and senate majority leader talking about how to accomplish that very thing. >> the ball is in his court. no interest in putting forth anything in the meantime? >> the president is in southeastern pennsylvania and not in washington, d.c. with 30 days to go to work out this very significant issue tells you a lot. it tells you he's not interested in negotiating. he's more interested in traveling around the country trying to campaign. >> we've had some people on this morning trying to explain why the market appears to be taking this all in stride. we're beginning to hear things like, well, if we go over the cliff treasury will freeze withholding rates. consumers might not see dollars flying out of their pockets
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right on january 1st. that's not a very comfortable place to be, would you agree? >> i would agree with that. i think this is a very, very serious time. the president has asked for $1.6 trillion in tax revenues and yet as i say he's projecting a $6 trillion deficit over the next ten years. that increase in revenues is not going to do a darn thing for deficit problem and according to a very well known accounting firm by increasing taxes over $250 this will lose 700,000 jobs over the next ten years. a tax increase of this nature isn't going to do anything to help our job situation. it's not going to do a darn thing for our deficit situation. why is the president only talking about taxes? that's the big question mark. >> congressman, does it help you that timothy geithner is leading the negotiations? >> i think we're in such a serious situation that with all
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due respect to the secretary, he shouldn't be the one leading negotiations. it ought to be the president of the united states. that's what he's elected to do. >> that's been tried before. >> he should be in washington, d.c. being part of discussions with the speaker who is the head of the house of representatives with the majority leader in the senate and face to face working out these issues. with all due respect, the secretary is leaving very soon from the cabinet. i'm not so sure he's the right guy to be sitting in that room doing negotiating. >> they have tried the boehner/obama dynamic before. the lessons from that weren't universally positive. >> you have to keep at it. that's what the american people expect of everybody in washington to sit down and work together and work this thing out and not use other people to be your spokesperson and trying to work out negotiation. the president needs to be here in washington, d.c. in the conference room working out this problem. that's what he was elected to do. >> clearly he will be in pennsylvania and watching that as well. congressman, thank you for your time. >> thank you for having me.
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appreciate it. >> congressman jim gerlach. coming up next, rick santelli is champing at the bit today so we moved up santelli exchange an hour earlier. don't miss his take on costco. >> we have an exclusive interview with goldman sachs chief u.s. equity strategist david kostin. he thinks the market will rise 12% next year. he'll give you his five best investment ideas. stay with us. if you are one of the millions of men
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>> hello. >> december 14th is earlier than many expected. does this make you want to change your estimates? >> i think the buy side is between 43 and 45 million. it makes us want to change estimates by probably a million or so higher but we're probably not going to do that and the reason is that the supply issue has been a huge problem in the u.s. so we're a little bit concerned to jump to conclusions that even though they are a week ahead of what we thought in getting us to china, we don't want to assume the best and we're going to take it conservative at this point. it's positive relative to how we were thinking about this compared to yesterday. >> what is the arrangement with china telecom and china unicom. will the phone be more expensive in china and apple won't sell as many? >> they have been selling about 16% of their phones per quarter. a majority of those are bought
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without subsidies. they tend to go 30% more in china versus the same phone in the u.s. despite the fact that it's really expensive, there's a lot of wealthy people in china that are willing to pay up for it. you mentioned china unicom and it is 5 million subscribers which is the golden nugget that apple is going for. that's probably not until the end of next year. when that happens, that's when things really get going in china. >> what is the holdup with china mobile specifically? >> it's hard to say. there's a technology hold up. that's something that's easily fixed. they don't have that high-speed network. that can easily be fixed. >> you mention the fact that supply issue seems to be ironing out here in the united states. you had that note out saying that right now if you walked into a verizon store or sprint
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store or at&t store, you can walk out with an iphone 5. >> that's right. we checked 70 stores every day. we've been doing this every day since the beginning of the quarter. you can walk into any one of those stores or apple store and buy an iphone. it's taken two months to get us there. the good news is that all that lack of availability should push some of the demand into the march quarter so for an apple investor you have a good march quarter based on the iphone. >> what do they say about ipad mini sales and whether it is n cannibalizing sales of the ipad. >> in terms of the actual sales, two-thirds of the units are coming from the low 16 gig and having hard time making those. on black friday we saw they didn't have much if any of those available. it's a two-week lead time today. kind the hottest holiday product and hottest ipad minis are in short supply. in terms of cannibalization,
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we're factoring in a 25% cannibalization so for every four ipad minis that get sold, we subtract one regular ipad. we saw some of that trend. i think you're going to see ultimately that percentage of ipad minis will be very high. it could be 50% of the overall ipads. >> all right. we're going to leave it there. thanks for your time. >> thank you. >> obviously casual friday in minneapolis today. time for a special edition of santelli exchange. want to go to the cme group. you are viral everywhere, man. the way you walked off camera this morning on "squawk," it's all over today. >> i don't know anything about that. i want all of the viewers and listeners to know, it's passion. it's not anger. because in the end, i love capitalism. what i don't like is hippo size. i mean hippo size.
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hypocrisy is what i don't like. you can see on the screen there was a wonderful op-ed and i missed this. i'm glad they pointed it out. costco is paying a special dividend. no real news there. it's what about $7 a share. 3 billion current tax rate. but here's where the hypocrisy comes in. i think the speech at the dnc was uplifting. a true capitalist. a nice rags to riches story. but he's at the dnc and the line that bugs me is we don't want one set of rules for ourselves and another for our employees. now, you see him on the left there, right? mr. sinegal and on the right is vice president at a costco today. here's the issue. okay. if you want to be shared sacrifice, you want fairness which is the theme of the convention and the entire democratic platform and they
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won, they own over 2 million shares. according to "the wall street journal" article, their tax savings by doing this now versus doing it later after december 31st fearing that dividend taxes at some level will rise into the 40%, their savings will be $4 million. let me get this straight. i told you. i love capitalism. everybody hates smoking but sometimes i see hypocrisy. up 128% since 2008. find me mutual funds that don't own it. find me teacher pension funds that don't own it. there's a lot of hypocrisy. this one with costco, it really hits at the epicenter that we need people to inform the masses that capitalism is the route. he took it. it was wonderful. we should all take it.
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but then don't say you're for the middle class and then rush to literally take the money right out of the middle class's mouth. i'm not for tax hikes. if you buy into the president's story and over half of the country did, i think his actions are not very courageous in my opinion my opinion. i urge him and all of those big business leaders that back the president to call him right now. call treasury secretary geithner right now and say, make our dividend tax cuts retroactive because we just sinned but we really feel sorry for it. back to you. >> it is possible that senegal has views on taxes that conform with this move. maybe his views leading him to democrat support have to do with education or the supreme court or gun control or foreign policy. not everybody is a single issue voter. >> no. not everybody is and, you know, give him the benefit of the doubt. let's give him the benefit of the doubt. take a step back. the issue is whether it's warren
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buffet worth 50 million pointing down at us and saying, hum. maybe the threshold should be 500,000 instead of 250,000. i don't know about you. but when i see the automatic pilot, and thank god it is for the business community to have accountants, mr. buffet doesn't do his own taxes. i doubt mr. senegal does. they all know this and they operate in a world where they preach to us what they believe is a middle class friendly gospel. but they don't really believe it. >> rick, this argument presumes that mr. senegal voted for the special dividend this year based on his own pocketbook. there are still millions of shareholders -- >> i'm not saying that at all. i'm saying that if you really believe, listen, if it was me, if it was me, i would take that money and donate it and i would call the president to urge him to make it retroactive because obviously they're just not feeling the religion right. sorry. but that's my view on it. >> i like it. rick, we'll talk to you in a little bit. thanks a lot. rick santelli with the santelli exchange a little earlier than
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normal today. do you happen to have 95 million bucks just laying around? in case you do, we have an apartment in the big apple that's worth that very same amount. a look behind the closed doors when we come right back. ♪ ♪ [ male announcer ] 'tis the season to discover the kid in all of us. the memories that last, start with the gifts that last. ♪ enjoy free shipping and great values on your holiday shopping from l.l.bean.
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it is one of the priciest pads on the planet. in today's million dollar minute a mansion in the sky worth just shy of $100 million. our robert frank takes you inside exclusively. >> step inside one of the most expensive trophy apartments in the world. the price tag? $95 million. perched high above fifth avenue and central park, this megahome has seven bedrooms, eight bathrooms, and three elevators that would whisk you up to your palace. the apartment takes up the entire 18th floor of the famous sherry-netherland and includes approximately 2,000 square feet of outdoor space with some of the most impressive views of central park. plus, 24/7 ala cart room service from cipriani's downstairs, maid service twice a day and space on another floor for your live-in
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staff. not included in the price tag the maintenance fees. those run you about $60,000 a month or $720,000 a year. for cnbc, i'm robert frank. >> wow. we were just -- that outside space is the equivalent of our apartment inside. big movers on today's session. naming names next. nobody said an inkjet had to be slow. or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series from brother. easy to use. it's the ultimate combination of speed, small size, and low-cost printing. thank you, mr. speaker, uh, members of congress. in celebration of over 75 years of our government employees insurance company,
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let's check back with yum on the shocking deceleration of trends in china now down 10% as you can see. rachel rothman at susquehanna suggesting they might actually be pursuing lower return new units in order to keep the growth story going. real bad day for yum. >> a flat line on the market. record highs. visa shares another record high. a string so far this week. that stock visa ticker symbol "v" is turning out a fresh high. also take a look at shares of clorox. that one is also at a new record high. aflac a 52-week high. a lot of notable stock moves today. >> though it is not a discretionary name which has been the story of the month. you buy things consumers want to
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buy for fun and you sell utilities, anything with a heavy dividend. hines is accelerating their payment normally in january. now payable december 26th. just under the wire. >> interesting. >> guys, have a great weekend. >> you too. >> see you next week. simon, see you in about 30. >> luxury goods are doing really well in europe today. phenomenal gains. we'll talk about that. >> all right. in the meantime if you're just tuning in here is what you missed early on this morning. welcome to hour three of "squawk on the street." here's what's happening so far. >> people have said that they want to overhaul the tax code and why do you want to raise taxes now if you're going to overhaul the tax code next year and change them again? that's crazy. >> it'll be the economic cliff we discuss in 2013 if he wants, if he gets away with raising taxes by 1.6 trillion. >> i come back to bizarre action of the stock market yesterday. i think that the -- to me it seemed like they got further apart. >> yes. >> i mean the president comes up
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with a pretty hard line. that was not a soft line proposal. and yet the market went up. what the heck? open marriage implies you're still staying with the person to some degree. i think this is a custody battle if anything. >> visitation rights. no alimony here. >> we actually saw strength all over the world. haven't seen too much reaction on the cliff. i guess it depends on your definition of cliff. if cliff means reduced government spending i think we could all jump off of that cliff and land in a nice, warm jacuzzi. >> we're checking our lists as the "squawk on the street" countdown to christmas continues. ho, ho, ho! ♪ jingle bell jingle bell jingle bell rock ♪ >> happy friday. welcome back to "squawk on the street." we're live here at post 9 of the new york stock exchange with a check on the markets as we continue to tread water here.
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dow is up a point. s&p is basically flat. although positive for the month and nasdaq down about three points as well. the grocery store operator super value seeing strong gains today after the company says it continues to review some strategic alternatives. still an active discussion with several parties. stock took a hit yesterday on reports the talks with pe firm serveus had failed. david costin out with his five new investment ideas for the new year. he is here to share his outlook for 2013. then zynga and facebook changing their relationship status and it is in fact complicated now that facebook will be free to produce its own games what does the future hold for zynga? plus the internet startup called the pinterest for news. snippet has received funding from some of the biggest firms around. we'll talk to the founder and ceo about what is next. and the fiscal cliff and the markets. just one month from the deadline
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obviously no deal in sight. we'll find out how you should be playing all of this uncertainty. but first up goldman is out with the 2013 outlook. it sees the economy growing almost 2% next year. 1575 is the year end s&p target goldman is giving, 12% above current levels. david kostin is the chief equity strategist for goldman sachs and joins us here with our capital markets editor. david, great to have you back. >> nice to see you guys. >> gary, got to let you lead it. >> somebody just told me that i am very nice in person but mean on tv so i have to be mean and tell you i actually went through the models. i did it putting on my former pm hat. i'll ask you a bunch of questions that i'm going to have to understand why you're making certain assumptions. let's start out with the fact that for this year, 2012, you really talked about pe contraction and that was one of your major theses was why do you see the price earnings multiple expanding in 2013 given all the various issues we have?
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that is part of how you get to year-end price target. >> correct. our forecast a year ago was the market would earn a hundred dollars. that's what our forecast was last year. they're coming right in at $100. for next year $107 and $114 in 2014. >> right. >> that is the path of earnings. so from a risk perspective, looking at the 2012, our concern was you wouldn't get a lot of extension because the economy would be in stagnation. we were not right in terms of the amount of monetary stimulus you saw around the world and that was basically if i look back at a report card on 2012, first half is pretty good. second half we didn't anticipate the impact on the market. now i think we're standing here at the end of november as you just said and three weeks away on the fiscal cliff so not a game over yet until we see a lot of risk from now to the end of the year. >> why pe expansion? you said 2% growth next year. why should stocks trade at a high multiple? >> right now as we enter 2013 the economy will be growing around 1 1/2% on annualized
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basis. a year from now the market will be growing around 3% annualized basis as you begin 2014 so that transition from a roughly, you know, little less than 2% growth rate to closer to 3%, that is what helps to close your output gap and leads to a higher pe. you're basically looking at our numbers. the market trades around 13.two times forward earnings and a year from now around 13.8 times forward earnings. that is the assumption in our model. we can get there a variety of ways. look at price-to-book ratios, return on equity. are we in the markets now 17%? that would suggest you even have a higher multiple as well from the price of books. lots of different approaches, gary. >> as we said at the top you offer five strategies for the year. the first is the simplest and that is to buy stocks and sell bonds. >> yes. >> this comes a few months after goldman made what they called a generational call, right, saying the longer buy to bonds. >> right. >> that trade is intact. >> that trade is definitely intact. you look out over a long period of time, say ten years, 90 over 95% probability you will do
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better as an investor over a decade in equities than in bonds. that is sort of a longer-term perspective. take a shorter-term perspective we're looking for a decline in the value of bonds over the next year because we have interest rates rising slowly. that's a view equities actually a function in fact the economy is doing better. >> david, underlying everything you've written for 2013 is the assumption the fiscal cliff does get solved. does that mean solved by december 31st? does that incorporate the idea maybe it gets pushed down to middle 2013? that is an underlying assumption you make. what is the real basis of that? >> so the precedent of the last two years is that negotiations continue until late, mid to late december. so you go back two years ago after the 2010 elections. there was an extension of the bush tax cuts. there was decided on december 17th. a year ago in terms of the payroll tax cut that was extended on december 23rd. so three weeks from today is december 21st. if you're looking for a day that is sort of the time period. if you're going to get something
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that would be about the time. obviously experts, my colleagues in washington, d.c. will give more details but from a strategic perspective there is a near term and longer-term path. the economy is getting better slowly. housing is getting better. there are forecasts in terms of the cash companies will spend. they'll spend over a trillion dollars next year in capital spending, in rnd, in cash m & a. these are the drivers of growth. once this fiscal cliff is addressed which we do believe, i believe it will be addressed at some point, that companies will have greater ceo confidence and see more spending. >> that leads you to your cyclical trade. >> that leads to more cyclicals. you said the top trades. you have equities versus bonds. we certainly like that as a strategic way to think about the market. you can look at the high yield and stocks doing well. depends on how much risk you want to take. the economy is getting better. that is good for high yield as well. better in terms of equities but high yield not such a bad place. >> u.s. over bricks, yes? >> no. >> bricks over u.s.? >> those companies that are
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selling more into the emerging markets. last year we had the view the other way and that was basically to be more domestic. it was more uncertainty with respect to what's happened around the world. this is now a view that even though the u.s. is growing at 2% it is going to grow faster in china, tick larm. >> one last thing. you mentioned the money goes on. you expected to continue around the world. one of the big differences with the other strategists on wall street is this idea about margin consensus for 2013. your below the consensus but you still think margins hold in. is that where you can differ with your competitors in 2013? >> right. margins have been flat for two years. >> right. >> eight quart ners a row hovering basically at 8.8%. net margins up across the market. our forecast is flat another two years. it is a little improvement in terms of gdp activity is what is getting companies on the top line revenues. we're not assuming any expansion on the margins, not assuming a decline either because we don't have the economy contracting. >> we haven't talked much fed
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here. we have a meeting in a couple weeks. to what degree are they a factor in 2013? >> well, i think the biggest issue from a risk perspective is the fiscal side. in terms of uncertainty. i think that is something you saw in the third quarter conference calls, in management's commentary was striking as to how many companies in every single sector was talking about how the uncertainty of the fiscal cliff was causing their customers, supply chains to slow down, decision making to be hampered in terms of uncertainty what the demand would be next year. i think that is the bigger issue. >> i tell you one thing, david, we've had negative outflows out of most equity funds throughout not just this year but the last couple years. you also believe 2013 we'll see 200 billion inflows into equity funds correct? >> correct. the biggest source of cash into the market is corporate buybacks. you've had $400 billion of cash spent by companies in the s&p 500 each year for the last three years buying back stock. >> right. >> i think that will persist into next year as well. that is the big dollar amount
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that you're looking at. the amount of net flow, that is the key. >> and finally, is any of this pivoting around whether or not retail participation improves in a significant way? >> well, it's my view that you'll have -- it will require bond yields to back up close to the 3% before you get a shift in asset allocation from bonds into stocks. so it is not as though it is going to happen immediately. it may happen over time. that is your trigger point. we like to think people would embrace more risk in terms of their portfolios as we see more evidence of the economy firming. >> is that because you think as yields go up people will see the loss on the bond principle and that will be the driver to put them into stocks? >> that will take sometime and it is i think a persistance. if you reverse the equation and say if you're an equity investor how much pain would you accept going down before you rotated out of equities? the issue is the other way in bonds. i think there has to be a sustained, material move and that will take in my view close to 3% on the ten year to get a
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shift in the other direction. >> because they have been stubborn. a great report, david. everyone should read it. thanks for your time. >> thanks, guys. >> as we said earlier zynga and facebook re-evaluating their relationship. one newspaper called it an open marriage at this point. so what zynga's game plan going forward? just game over for social gaming in general? but first, rick santelli working on something for a little bit later on in the hour. >> absolutely. for the bottom of the hour we'll have one of my favorite economists, jim bianlgo. we're going to talk about gdp, why the markets didn't like the revision better. how many analysts are lowering gdp for the fourth quarter and is there really a sense of safety in treasuries? we'll have an opinion on all of those bottom of the hour.
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welcome back. the markets desk and of course the special dividend and dividend stuff is absolutely fascinating. want a few more details on heinz hnz. they usually give their dividend in early january. they're moving it up to december 26th. looks like investors are kind of thinking they have a little more time because it's actually down a few cents, carl, and on very light volume. this name yields 3 1/2 percent. back to you. >> yeah. that's the interesting thing. some of these dividends are coming from companies with even lower yields overall. good point. facebook and zynga making some big changes to their relationship allowing facebook
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now to develop its own gains in the future if they want. zynga shares obviously tumbling on that news. julia boorstin is live in l.a. with what this means for both companies. fascinating story. >> absolutely, carl. the status is definitely no longer special and exclusive. now facebook and zynga are still dating but seeing other people. facebook's treating zynga just like any other developer. that includes a rule that prohibits zynga from driving gamers from facebook to zynga.com. an opportunity for cross promotion that zynga alone had. this could really limit zynga's ability to grow zynga.com. the platform ceo mark pincus wants to turn into the destination for social gaming. part of the strategy to diversify away from its reliance on facebook with its own platform and new focus on mobile games. zynga.com no longer needs to use facebook log-ins and the platform can opt not to use facebook payments or to display facebook ads. a couple analysts do see this as a positive for zynga.
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webb bush says zynga.com will be better positioned to compete against other developers and needham expects the new rules to help zynga.com over the long run. though the new rules do allow facebook to make its own gains the social network says it is not interested. more important for facebook, this will help it keep gamers on its site rather than leaving for zynga.com and also require zynga to launch its real money gaming initiatives, gambling, on facebook. it also allows the social network to build relationships with other developers like king and wooga. now last quarter facebook's payments revenue from zynga dropped 20% from a year earlier. but ceo mark zuckerberg pointed out other publishers are thriving. even though they don't have zynga's scale it does show there is growth elsewhere. that means facebook no longer needs to give zynga preferential treatment. >> any sense where zynga might turn now that they're sort of detached from the big kahuna? >> well, the thing, carl, is they still are going to be on facebook. the relationship is ongoing.
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they just are going to have a little more independence. as zynga tries to focus more on mobile games, focus more on this florm, it has to operate more like a stand alone game company instead of having these preferential terms. i think we will see zynga games on facebook forever. it's just a question of where zynga devotes its resources. >> it's going to be interesting to watch with the stock of course under $3 today. julia, thanks. of course, don't forget facebook and zynga are the subjects of our twitter questions. come up with the unique relationship questions and tweet us. we'll get your responses later this morning. the computing ecosystem is ever changing as the addition of more and more tablets come to flood the market but printing is often a hassle as you probably know and people are looking to share data through cloud apps like those offered by box and ever note. cnbc's john ford joins us with more on that. no secret the pc business itself is suffering. it was down 8% worldwide in q3
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and recent earnings report from hp, dell, and others reflected via people. the impact goes far deeper the pc era and industry full of accessory makers benefited from every pc sale. shoppers bought add on key boards, printers, ink for example. now momentum is shifting to tablets like apple's ipad. capital markets estimates tablet makers will build 85 million tablets this year with three of every four from apple. he believes that tablet effect will shave 9% off of 2012 pc unit growth. but that's good news for startups like evernote a note taking app. the business now gets the holiday boost pc accessory makers once enjoyed. the first weeks of january he told me are evernote's busiest period as people download productivity apps like his for their new tablets and smart phones. and to prepare for that surge he has upgraded evernote's data center to handle hundreds of millions of users. he also pushing his team to deliver new versions of evernote's apps before year end. and box ceo aaron levy says he
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sees a similar impact. the surge in tablet and smart phone adoption is fueling customer demand for services like his. >> across the entire board then the majority of our usage is now coming from nonwindows machines and that's because you can now access your information and your software from all of these new kinds of devices. >> there you go. accessories used to mean printers, blank cds, usb cables. now much of that business is in the cloud. the numbers tell me this is a megatrend we'll see play out throughout 2013. companies like logitech, apple brand, early numbers from windows # don't offer a lot of encouragement that will turn around any time soon. >> thank you so much for that story. when we come back with the dow down about 7 points today we'll talk about the internet startup that the ceo calls the cure to internet a.d.d. now snip it is combining the best parts of twitter and tumbler and taking the social
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network world by storm. utilities and telecom leading the way today. tech and discretionary doing the worst right now. sort of an inverse of what november has all been about. back after a break.
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post 9 this morning we continue with our squawk on the verge series. our guest is the founder and ceo of snip it. welcome to the show. >> good morning. >> we were talking during the break about the model and what is new and what is familiar about it. your poichbt is thnt is that ot allowed you to share in some respect but it hasn't been highly personalized. >> absolutely. snip it lets you share the best articles of the web but more importantly add your voice and your opinion to it. and then put it in collections around your interests. >> who is a core user, a classic snip it user? >> folks who love to share content and who have strong opinions. >> demographically would it break down a certain way? >> actually it's pretty straight forward, pretty even men and women, educated for the most part who are snipping, but very split male/female which is remarkable for a social media
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startup. >> talk about how you got it started. we were talking during the break how you used to work for a guy who knows how start-ups are supposed to work. has his insight been valuable? how has it been trying to put this thing together with how many employees, ten? >> we have ten employees. i used to work for vinote and back in march of last year the whole arab spring started and because i'm originally from egypt my friends reached out and said where is our best content on egypt? i started sharing on facebook. then my friends got tired of me sharing about the middle east. >> as a lot of friends do. >> i realized there is a need for a better place to share content around your interests where anyone can discover it. that's the idea behind snip it. >> walk me through the journey of raising capital. >> raising capital is always tough. you should always do it when you don't need it. we've been lucky, fortunate to have two amazing firms, both with incredible expertise in social media and a very long-term view.
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when you start a social media startup you want investors with a long-term view and perspective. >> obviously raises questions about monetization, migration to mobile. how do you make the money? when do you become profitable? what is the endgame? >> the endgame is to be the primary way which people share and discover content. every morning you wake up and go to snip it and that is where the best content is. monetization comes through ads. because people are browsing snip it are browsing a particular topic, say you're interested in technology or mobile or finance. we're able to provide very targeted ads that result in high monetization. >> finally a number of users, targets, projections for a year or two out. >> right now we have about 35 people creating the site. people browsing have been in the millions. we are targeting to more than a million creators and hopefully
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hundreds of millions of browsers. >> keep our eye on it. with vinode's backing it is definitely going to get a lot of attention. thank you so much. joining us here from snip it. we'll get the european close in just about three minutes. don't go away. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade.
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we talked about the collision between data and stock markets. simon, record unemployment but it certainly leaves the markets lower in europe. >> absolutely. the unemployment in the eurozone
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11.11% so it continues to rise. even retail sales were in negative territory down 2.8% on the month so the data is poor but actually the european markets are doing relatively well. as we work our way of course you might argue keeping the count down the road certainly to near-term resolution. here we go. >> european markets are closing now. >> a huge day as you might expect. very, very focused on our markets here in the united states and what's happening with the fiscal cliff. it's worth noting today as we wait of course on monday for the pricing of the greek debt buyback from loans for the rest of the european union that the german lower house of parliament, german lawmakers today pass the greek bail out. it was always going to go through. you knew it would go through because the opposition will vote in favor of it but the chancellor angela merkel didn't get a majority within her coalition, 23 lawmakers there opposing. it's interesting also that the german finance minister, you
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know, if greece defaults that ultimately will collapse the euro. it was under that threat they were voting today. incidentally just on the pricing of that debt buyback from monday the indication seems to be it will go through relatively successfully targeting 6.8 billion euros it would appear at face value. partly it will go through because of so many state controlled lenders connected to the buy back particularly the greek banks sitting on a huge amount. we'll talk about that at the beginning of next week. in the meantime as i mentioned, as carl mentioned the stock markets continue to do well in europe. the top 50 blue chips, this is actually the top 600. where am i? on the top 50 blue clips? let me tell you anyway. as far as the stocks, top 50 blue chips are concerned in europe they're actually now back at the top of the 150-point range back where we were in september and if you look at the broader market it's actually trading at a level that we've not seen since june of last year. the question is do we break out from here? what is interesting is luxury goods in particular. i mean they're not big market caps but they are doing well in europe today. we had an upgrade on lbmh from
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goldman sachs on the basis of china and perhaps a better sales there. they are now suggesting you should buy lbmh. i just want to show you some of the other luxury goods makers the degree to which their charts are so steady. if you look at a five-year chart. look at christian dior straight up. it almost has a defensive character you could argue. a two-decade high today though the five-year track perhaps isn't as courageous as you might hope. richemont. it has been a massive week for spain particularly with the restructuring of the banks and announcements. warren buffet's berkshire hathaway going in to pay 600 billion euros for the future streams on some insurance products. today bankia which had its own restructuring announcement wednesday was down again today 19%. i want to leave you finally with upbeat images from spain.
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health care workers in madrid have been on strike all week but they decided one day this week they would for a bit more fun have a flash mob and do a little dancing and ultimately that was what they arranged to do as they protested against austerity. you see you can have a smile, carl n. the midst of all that. look at that. it's good dancing. >> i wish we could put protests like that together in this country. that is dynamite. >> for the fiscal cliff. a dance off. >> thanks, simon. >> have a good weekend. >> you too. let's check on energy and commodities. sharon epperson at the ime x this morning. >> not dancing down here carl but they are trying to figure out what is happening here with the u.s. fiscal cliff as well as in europe and in fact it is the situation in europe that really has helped to take the euro to a key level here right around 130 and that has helped some of the industrial commodities like oil and copper which are faring slightly better today. but only slightly. we're really not seeing much movement at all particularly when you look at the price of
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crude oil with bret crude right around $110 a barrel and wti futures under that 88.50 level. we haven't seen much movement in a whole week's time where we're basically where we were last friday. there has been of course volatility throughout the week. every headline that crosses about the fiscal cliff definitely sends traders fretting one way or another but there hasn't been much price action and it's hard to really take any big bets traders say based on what we're seeing right now until there is a firm resolution. in terms of the oil price, well it certainly is a lot of volatility there and in fact record volume in gold futures this week in light of what we have seen over particularly on tuesday's trading session. but we are still looking at gold prices as well in the middle of the range they've been trading in all week long right around the 1725 level and looking at a mixed picture throughout the metals market. back to you. >> thank you so much for that sharon epperson. bob pisani is here post 9 looking not just at today but next year. >> yeah.
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it's a slightly, i don't know, gloomier outlook on things. maybe because we're starting to realize 2013 is going to be a lot tougher. we're even on the advance decline line a fairly narrow range on trading. utilities are leading. i want to show you a couple things about what i think is happening. what the traders have been saying. long term they're looking at 2013 now. they see the fiscal cliff, whether you get it resolved or not, as still a tough year overall. we've got tax increases, spending cuts coming. no matter what happens even in a good news situation we have likely tax increases and spending cuts coming. intermediate term and short term also an issue. short term talking about today and into the weekend and into monday morning here. remember, this is the last day of the month. we'll have real headline risk over the weekend where anybody can make any statement and all of a sudden we could end up down 15 handles on monday morning at 9:00 a.m. eastern time. so that's a big issue short term. intermediate remember a lot of people, and it's shocking how
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many, are under performing their benchmarks this year so going into a month with a lot of uncertainty. can they really lighten up on their positions? they need alpha. they've got to out perform somewhere so there's a lot of pressure on people to do well in december and it's very tough to make a decision on what you need to do right now. so a lot of tough decisions in the next week or two. some of it arouchbd the fiscal cliff. some of it not happening. i want to move on because i got a lot of comments on my, on what i said on china yesterday. i have expressed chagrin about what's been going on in mainland china. a lot of people have been encouraging buying around here in august and september and what we've seen is things moving to the down side. on the mainland you saw the a shares that trade in the mainland. now if you take a look at china overall and hong kong versus shanghai, it's a very different picture. hong kong has been performing much better. whereas the mainland and these are only open, the mainland is only open to people living in china and mainland china has been under performing. how do you explain this? a lot of people have asked me to get a little more explanation.
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here it is in 30 seconds what i think is going on here about this huge divergence. shanghai is a very, very different market. it is only open to domestic investors. that means international investors like us can't get in. it's got a much bigger float than hong kong. they have flooded the market with shares and there are efforts here now to buy back shares. i think there's too many shares trading into the domestic market and so the liquidity, there's not enough liquidity for it and also more alternatives for investors so they can go into real estate now for example as opposed to staying in the stock market. contrast that with hong kong which allows global investors in like us and it's a more efficient market overall because of that. so let me just show you that hong kong versus shanghai. my opinion here is that you ought to pay a little more attention to the hong kong end than to the shanghai end. finally let's point out the investor because people ask me what should they be investing in in china. the fxi is the big etf here. the problem with this, two-thirds is bank stocks. i think that's a problem. i've always had a problem with
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this index. just let me point out one and i'll go away right now. the spider index. take a look. the symbol is gxc. only one-third of this is bank stocks. the rest of them, carl, are things like material stocks and technology names, telecom stocks. i think this is a little bit broader, this gxc, than the fxi even though the fxi has a lot more people invested. this is a big issue because they're trying to figure out what they should be doing on china next year. >> certainly gets a lot more attention bob. thanks so much. good weekend. one retailer hitting a 52-week low. >> a tough day. you know, they missed on the top online guidance down below consensus. comps minus 4%. they did site sandy. what is interesting about the action, down about 7% is what the analysts are saying. credit suisse reduced their price target from 25 to $23 and say neutral but carries and company retains their buy rating with a $47 price tarpgt they took it down to 40. so obviously they still see huge upside in this company even though it's down 6.5% and their
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guidance is down. back to you. >> all right. thanks so much. let's get to rick santelli in chicago. he is in the pits of the cme with jim bianco. rick? >> absolutely. always an interesting guest. welcome, jim. i guess let's start out, you know, if i go back to october 26th when gdp from third quarter had its flash and it was 2%, the market was down close to ten basis points. they weren't satisfied with it even though it was better than everybody thought. so yesterday we get an upgrade to 2.7 and what happens? the market doesn't do anything to the down side reflecting that strength. so i think the market is smart. what do you think? >> i do too. i think there are two things. one the market looked at the internals of that number and it wasn't very good in terms of consumers' consumption. some of the other numbers on investment. it wasn't anything to really get excited about. it was a lot of government spending and a lot of other things. second, i think the market is looking forward at a weak fourth quarter number. >> where is bianco research with regard to estimates for fourth quarter growth? >> we were two before sandy and now well under two with sandy
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and if we get no fiscal cliff deal or kind of a milk toast deal i think we'll stay at those sub par numbers in the 2013. >> even without sandy you didn't think it would be much above 2%. >> right. i'm in the camp the economy is still struggling along. not a recession but not doing very good. >> let's switch gears. there have been many articles out. you always point them out to me. the world's been bearish from treasuries and the world of economists and analysts for years now and they've been wrong. what do you think at this point? >> same thing. bloomberg does a survey of about 80 or 90 economists a month. >> i don't know who they are. >> i've heard of that. 95% of them in the last survey said rates would be high inner six months. you know what? that's been what they've been saying for years now. and everybody continues to push this idea that bonds are a terrible place and all bonds ever do is continue to out perform. you had kostin from goldman sachs on earlier saying bonds would be a terrible place over the next ten years. that is the story not kostin per se but people have been saying for many years and it doesn't
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work out. as long as the fed has qe and has a printing press buying bonds they're going to stay where they are right now. i don't think they'll go up any time soon. >> i wouldn't disagree. i see that jim bianco doesn't have a rise above pin. now jim, i'm not going to try to pin it on but i'll give you this pin and just asking you, what are your thoughts about rise above? i think the republicans are eating a helping of crow. >> i agree. i hope everybody rises above. the republicans have put revenues on the table. time for the president to put spending on the table. >> how easy. extend medicare two, three years. give us a number. social security both parties. i don't know if you agree. both parties. payroll tax is really on taxes. they say these things, it's a contribution for a plan. don't take it away. a plan is going belly up anyway. would you agree or disagree? >> i agree. we have to rise above taxes and start to talk about spending. >> back to you. >> all right. rick, thanks guys. the housing market is in the middle of a tenuous recovery and
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the fiscal cliff could come along and derail it completely. why we could be waving good-bye to short sales at the end of the year. more on that after a short break. try running four.ning a restaurant is hard, fortunately we've got ink. it gives us 5x the rewards on our internet, phone charges and cable, plus at office supply stores. rewards we put right back into our business. this is the only thing we've ever wanted to do and ink helps us do it. make your mark with ink from chase.
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time to bail? two traders one big debate coming up. facebook soars almost 30% in november. its best month ever. is the turn-around here to stay? we'll see you in about 15. >> sounds good. thanks. there's been a sharp rise of short sales in the housing market recently. could the fiscal cliff be to blame? certainly looks that way. cnbc's diana olick explains how and why. good morning, diana. >> good morning, carl. signed contracts to buy existing homes took an unexpected leap in october which led us to ask if the fiscal cliff had any hand in it. specifically around short sales which have been an ever increasing share of the housing market. now tax relief on these sales could be in jeopardy and that may be why they're revving up. let me explain. a short sale, where the bank lets you sell your house for less than the mortgage, is debt forgiveness, right? the bank is eating part of the mortgage in order to avoid a more costly foreclosure. debt forgiveness is usually taxable but not under a tax relief law passed five years ago that, yes, expires at the end of
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next month. if it is not extended because of the fiscal cliff, debt relief will become taxable again and that will affect thousands and thousands of short sales and principal reduction loan modifications many under the big robo signing mortgage settlement. that settlement is why short sales have skyrocketed, surpassing foreclosure sales last june and keep on going. in nevada they made up 40% of october sales up from 34% a year ago. that according to lps home price index. now bank of america alone has done over 100,000 short sales so far this year. and i spoke to a rep there who says they are well aware of the potential looming tax risks as are their customers. they say they would love to ramp up short sales but they're already doing them as fast as they can. i ask what happens if the tax relief is not extended? the source told me i would expect we start to get more customers saying i've talked to my tax adviser and i'm going to opt out of that short sale and we'll just take it to
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foreclosure. and, carl, that is exactly not what we want to hear as this housing recovery is really just gaining steam. >> wow. in your opinion diana would we start to see that, the impact in sales of existing and starting in january? >> well, starting in january you would start to see those short sales go away and that would mean more homes would go to foreclosure. short sales have really been saving this market keeping people out of foreclosure and helping to keep that floor under home prices. so again, this is a big risk. >> a big one to watch. thanks for drawing our atoengs it. diana olick in washington. i want to draw your attention to a video that's gone absolutely viral. we have found what could be the youngest fan of our fiscal cliff rise above coverage. this is little charlie here watching closing bell. [ laughter ]
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there was a little bit right? >> absolutely. tell us why you are here at the new york stock exchange for this event tonight. >> i am here for an event with the national ability center and wounded warriors called saluting our heroes and part of the reason i climbed kilimanjaro was to demonstrate some impossibilities out there. i wanted people to see me and not the wheelchair. i think we have to try to find a way to do that. these twor amazing organizations that open peoples' lives, give them a new liease on life and say, wow, what else can i do? >> you talk about possibilities and i know you are a great motivational speaker. you talk on leadership. there is a great concern out there with the whole fiscal cliff issue that one of the main areas of the economy of really the country that is going to be impacted after january first is donations to charities. i know you have some thoughts about that, about that concern and how we may have to get the message out that this is such an important focus. tell us about that. >> it is a really difficult
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question. certainly all of us are looking, you know, potentially as a really big thing. i think what are we going to be left with? we have to look at the bigger picture and say if we are investing in some charities we are investing in our community and we are investing in ourselves. i don't want to see that go away. this is making your world a better place for all of us. >> this great group, these are people that volunteer their time, their efforts and really their hearts. it is so uplifting. i know you probably agree. we talk so much about the negative things. what a great story and great positive event. >> it is an honor to have him here on the floor and for the event tonight. thanks so much. still to come the ceo on holiday season sales. don't go awachlt uncer ] this december, remember -- you can stay in and like something... or you can get out there and actually like something. the lexus december to remember sales event is on. this is the pursuit of perfection.
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and our financial empowerment program, which helps prepare those who come next. resources like these have made us the number-one trust company. that's why generations of families have come to us to help build their own legacies. tiffany shares falling 6% yesterday on the weak guidance perhaps a red flag for luxury retailers like burr berry this holiday season. what does luxury have in store for it? >> burr bury just opened up its largest flag ship on chicago's miracle mile. i spoke with the ceo at burberry
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new location and asked if she was concerned about the slowing global economy and the impact on the key tourist dollars. >> the asian consumer alone 70 million last year. 100 million in the next three years will be leaving mainland china. we know the top ten cities. they want to go to chicago is up on the list. so i think you'll have different points in time where things are challenging but the long-term metrics for tourism are still strong in the flagship markets. >> she's upbeat about the holiday season and luxury in general despite acknowledging the fiscal cliff and european debt crisis are likely having an effect on luxury consumer spending. >> typically luxury does out perform most other sectors if you will in good or in bad times. so i think that our customer is probably being a little more conservative but you can't talk about the luxury customer in the aggregate either. you have an ultra high net worth, core luxury market and a lot of first time aspirational luxury customers coming into the
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sector. >> the aspirational consumers she says they worked so hard to capture. she has led burberry into world of innovation teaming up with the sales force.com ceo to complete a technological revolution from its website experience burberry world to the media campaigns, employees outfitted with ipads to blend the digital and physical experience to work together. investors are applauding the effort so far. burberry shares up 200% since she took over as ceo in 2006. carl? >> wow. amazing to watch especially given some of the guidance out of the big european retailers too. thanks. >> thank you. >> tweet time. facebook and zynga changing the terms of their relationship that would allow the social network to make its own gains down the road. we asked you to come up with a unique relationship status for facebook and zynga. a bunch of good responses. james writes, zyn-you-later.
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hey, i need myspace. and one of our splitsville. it will be interesting to watch that. down about 20. we have data today but obviously washington still key. gary, boehner i think is going to talk later this afternoon too. >> the markets will move as we pointed out yesterday for whatever it is worth it will move on this. i have to tell you reflecting on today's show, obviously chris waddell blows me away. david kostin realistic. the guy has been right more than wrong and has good reasons for his thesis which is what is most important. i will tell you this. i'll be out next week but i am putting together my 2013 we all have to do it at cnbc.com, my 2013 outlook piece and what i chose to do was go and speak to the people that have been the most right, the best experts i've spoken to all year. i have to tell you most people in that kostin camp up

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